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In an August 7, 2009 Cnet News article titled “Google ups director compensation awards” author Tom Krazit says: “in a filing with the SEC Friday, Google revealed that it will be breaking with tradition by deciding to pay directors not employed by the company $75,000 a year in cash and $350,000 a year in restricted stock grants.”

From its infancy in 1998 through its rise to the top of the Internet search engine food chain, the company has changed drastically; Google’s business strategy has evolved as its meteoric stock price growth has slowed. Both these changes should have – and apparently did – engender a change to the Board compensation.

In his white paper “BOARD OF DIRECTORS TOTAL REWARDS STRATEGY: COMPETITIVE LEVELS, MIX, AND MESSAGES THAT MAKE GOOD BUSINESS SENSE” Grahall’s Michael Graham says: “On most of the boards with which we consult the majority of members would agree that ‘they don’t do it for the money.’” The business connections and insights that Directors gain by sitting on boards are valuable, Graham adds, “…however, I don’t think many of them would continue to do it without the pay.”

And although it’s true that the majority of companies pay cash remuneration to directors, Graham also says: “…no two organizations have the same relationship with—or expectations of—their Board of Directors…. Similar to the way one would design a total executive rewards strategy, the review and evaluation of any particular organization’s Board of Directors’ rewards strategy should begin by addressing a series of issues designed to determine the responsibilities and roles of the directors.”

Graham explains that a company’s business strategy and life cycle will dictate the nature of the relationship between the board and the company. That relationship will then help to define the correct rewards structure. Graham has defined the roles of Boards of Directors as follows:

Over the years, Google’s business strategy has changed, as has its relationship with the role of the Board. No doubt Google has changed its Board compensation structure to keep current with these changes. But under any set of circumstances, our Grahall consultants all agree: Google’s Board is paid very, very well in comparison with those of other companies. The upper regions of annual board pay are more typically in the $250,000 to $300,000 range. The combination of restricted stock and cash now paid to Google Board Directors substantially expands that region’s borders.

For additional information on the manner in which boards are paid, see Grahall’s authoritative research reports on this subject.

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[...] Another important component of Board governance is how much the board members themselves are paid. Grahall is finalizing soon-to-be-released research on Board of Directors governance, which considers the roles of boards, the contributions they make and the pay that they receive. The basic premise is a “pay-for-performance” model for Boards of Directors. If boards make large contributions, they should receive higher pay; limited contributions call for lower pay. And this applies not only to boards generally, but to the contributions of each individual board member. (For more information on Board roles and contributions see Omni Blog: They Work Hard for The Money) [...]